BORROWERS Mortgage Commentary 21 / 2015
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Issue 2015 /21       27 November 2015

Welcome to the twenty-first fortnightly General Finance Mortgage Commentary for 2015.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  

The Money Market
This morning (9am on 27 November 2015) the money markets were at the following levels:
Official cash rate    2.75% (unchanged)
90 day bill rate       2.88 (down from 2.90)
1 year swap rate    2.68 (down from 2.79)
3 year swap rate    2.77 (down from 2.88)
10 year bond rate   3.19 (down from 3.24)
NZ/US dollar      0.6573 (up from 0.6546)

Strong Population Growth
NZ is experiencing its strongest population growth since the mid 1970s. Last year the country had a net migration gain of 63,000 - that is the difference between the 120,000 who arrived and the 57,000 who departed.  It is this net migration gain that is driving up house prices in Auckland and responsible for our GDP growth.  The negative side of all this, is that our labour force is continuing to expand, and this is actually keeping wages and salaries down and our unemployment higher, than it would be otherwise. If the Australian market starts to pick up, our net migration rate will certainly ease.

 Rental Freeze is a Bad Idea
There has been talk in some circles that, in order to try and ease rising rentals, particularly in Auckland, we should have a rent freeze. These have been tried in many countries, as well here, and they have never worked.  What generally happens, is that landlords stop spending money on repairs and improvements, as they cannot recover these through increases in rentals. Some landlords may exit the market, and these properties that may have housed four or five people are bought by home buyers, housing just one or two. As a result, a shortage of rental housing develops. What makes this worse, is that no new rental housing is being built, as the returns are not there.  This further compounds the rental housing shortage.   The solution to easing of rents is to build more dwellings. This is the way to keep the rental housing market competitive. 

Asbestos Law Change Coming
Early next year, a new law is being passed that will require more asbestos removal work, and the operators will have to be licensed.  Asbestos was widely used in building due to its sound, electrical and building insulation qualities. It was used in this country right up to the 1980s. A negative side of asbestos is that it can have severe depilating health and carcinogenic qualities, for those who come in contact with it. As a result, its use has now been banned. The renovation or demolishing of older style buildings may pose a real asbestos risk.  Hence the requirement for licensing, and stricter rules around dealing with this product. 

Business Finance
Although we only lend on residential or lifestyle types of dwellings, this does not mean that we only lend to those buying these types of properties.  We can lend for all sorts of purposes, as long as the security is residential.  For instance, we are doing a number of loans for businesses purposes, including buying new plant and equipment, additional stock and business acquisitions.  We are happy to look at these transactions, as long as the security offered is residential.

Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the General Finance Limited Loan Administration Department.

As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.

General Finance Limited is a Registered Financial Services Provider, with registration number  FSP8882.